Bulgaria to Revise Growth Forecast for 2010 to 1%

April 16 (Bloomberg) -- Bulgaria will revise up its
economic growth forecast for this year as recovering exports
bolster the expansion, Finance Minister Simeon Djankov said.

“The economic outlook is more optimistic now than it was
at the end of 2009,” Djankov said today in an interview in
Madrid. “We are likely to upgrade our economic forecasts in the
next few days to something like 1 percent.”

Prime Minister Boiko Borissov’s government previously
estimated the economy would grow 0.3 percent after a contraction
of 5.1 percent in 2009 on dwindling investment and consumption.

The economies of eastern Europe, which grew at a faster
pace than their western peers earlier this decade, are
recovering from their deepest recession since switching to free-market policies 20 years ago. Fiscal deficits, exacerbated by
state spending to help revive economic growth, rose last year to
6.5 percent of gross domestic product from 3.3 percent the
previous year, the World Bank said on April 1.

“Unemployment is stabilizing, slowly falling, which is a
positive development, and the mortgage market has been rising
for a third consecutive month,” Djankov said. “These are all
small positive signals.” Unemployment eased to 10.1 percent in
March from 10.3 percent in April.

Euro Application

Bulgaria may start its application process for the European
Union’s exchange-rate mechanism ‘within months,” depending on
whether EU authorities put the country under their scrutiny for
an “excessive deficit” after the government this month revised
up its budget shortfall for last year, Djankov said.

Should the EU sanction the government for last year’s
hidden budget gap, the Balkan country would apply for the pre-euro currency stability test “early next year,” Djankov said.
Borissov’s government took over from the Socialists after
elections in July 2009 and on April 9 uncovered a budget deficit
of 3.7 percent of GDP for last year.

The European Commission will say that Bulgaria’s steps to
rein in the shortfall are “adequate,” in their assessment of
the country’s latest convergence plan, Djankov said.

The deficit this year may be 1.8 percent of GDP, Djankov
said. Bulgaria’s budget deficit expanded to the widest in at
least a decade in February as tax revenue fell because of
declining imports. The shortfall more than doubled to 1.398
billion lev ($964 million) from 500 million lev in January.

On April 1, parliament approved 60 steps to raise 1.6
billion lev and narrow the widening deficit by the end of the
year. The steps include the sale of minority stakes in companies
and of greenhouse emission credits, cutting administration costs
and raising taxes on gambling and insurance premiums.

The EU’s expansion to 27 nations since May 2004 requires
new members to adopt the common currency after fulfilling
criteria on debt, budget deficits, currency stability, interest
rate convergence and inflation. Slovakia and Slovenia have
already made the currency switch, while Estonia hopes to follow
their lead next year.